Selling a house? Now you have to prove to the ATO that you’re actually an Aussie…
So this has got me rolling my eyes like a pokie machine.
The ATO has gone and lobbed a grenade into the property market, right out of left-field.
You might have seen it already. It’s causing a bit of a stir.
Under the new regime, if you purchase a property worth $2m or more on or after July 1 2016, you will be required to withhold 10 per cent of the purchase price and remit it to the ATO UNLESS the vendor is able to provide a special purpose tax resident’s “clearance certificate” from the ATO.
Yep, unless the seller can prove to you that they’re an Aussie, you have to give 10% of the purchase price to the ATO.
At first I’m thinking, oh yeah, no worries. I’ll just smash a stubbie of VB in a single slug and belt out a few bars of Khe Sanh.
(Just another Saturday at auction.)
But no it’s not as simple as that. I’ve got to go to the ATO and get a 6-page ‘Foreign resident capital gains withholding clearance certificate application’ form.
I’m not shitting you.
That certificate is then only valid for 12 months (in case my country of birth changes in the interim.)
Holy-flipping-dooley.
Effectively, the ATO are saying that the starting point is that everyone selling a property in Australia is a foreigner, unless they can prove otherwise.
Now think about how many properties are sold in Australia in any given year. How many of them are actually owned by foreigners? My guess would be zero point stuff-all.
Of course we are talking properties worth more than $2m. That used to mean high-end properties, but not any more. We’re now talking middle of the road up.
My point is that in order to catch a small number of illegal foreign purchases, by picking them up at the back door at the point of sale, we all now have to jump through this ridiculous hoop.
The worst of it is that it looks like the ATO has used a legitimate public concern about illegal foreign purchases to expand its data collection and policing.
True, this will make sure that foreigners meet their capital gains tax obligations and that’s a good thing.
But say you’re a bit behind on your tax return. Or if you run your own business, or use a company to run your property investment business, say you’re a bit late on your BAS.
Does the ATO have the ability to hold out on you? Can they say, No Jon, you’ve still got $12 outstanding from your last BAS. Pay it up like a good boy and then we’ll give you your clearance.
The ATO will also be able to compare asset-ownership with declared earnings – so if you’ve been earning minimum wage but are asking for clearance on a $5m beachfront complex, it can raise some flags.
And they get to run this check on you every 12 months if you’re a serious investor who sells properties regularly.
Now I’ve got no problem with any of that in principal. We should all be playing by the rules. But it does worry me that property is being used as the Trojan horse to slip these extra powers through.
Because there’s already a prejudice against property built into the system. You don’t have to pay stamp-duty on shares, or land tax. And my bet is that it’s a heck of a lot easier to dodge tax through the share market and off-shore entities than it is through property.
So claims that we’re gunning for the ‘high-end’ sound like BS to me.
When I look into my crystal ball, I see the $2m figure holding steady, even as the median house price in Sydney eclipses the $2m mark sometime around 2020.
I also see a point where we actually do find ourselves in a budget black hole, and the government drops the threshold to $1m, or even all together to increase the tax take. I also see the ATO introducing “processing” fee.
(I also see Carlton having a blinder of a year in 2017, by the way.)
And so the real targets here are not foreigners, it’s not even ‘wealthy’ people. It’s ordinary Australians.
It’s aimed at people without enough wealth to set up complex trust structures, and get funny with the stock market. It’s aimed at people whose primary store of wealth is their home.
The tax system is skewed against the poor. The more money you have, the more opportunities you have to game the system and get away with paying next to nothing.
If you work a 9-5 job, you’ve got nothing. The tax-man takes your money before you even see it.
And pretty soon, you can expect a tax-audit every time you want to sell the family home or off-load an investment property.
You get shafted every which way.
All in the name of managing the problem of foreign buyers – a problem which seems to be sorting itself out anyway, and was probably better dealt with through the state governments stamp duty register, or local councils rate collections, IMHO.
I don’t like where this is coming form and where it’s going. Maybe things in Canberra are leaner than we thought.
And on top of that, it’s shaping to be a real pain in the arse.
Add negative gearing changes to this, and extra taxes on foreign purchases, and it’s shaping to be a hell of a year for property.
Lay off the golden goose, you turkeys.
Is this going to affect you? What are you going to do?
Graeme M Clark says
This country is becoming a disgrace with it ridiculous and lazy laws. The US is very similar and people wonder why someone like Trump gets traction. Can you imagine him allowing that? We need a revolution.
ron goddard says
hi jon, its a nightmare coming true. we follow the americans in every way possible…right into the jaws of big brother. the irs (usa) have almost complete dominance in everything they do(the americans). i get emails from the sovereign society in usa..and they have been telling people for many years the future of the people in good ol’ us of a. i think its time for a sequel to eddie murphie’s ‘coming to america’..maybe ‘getting out of america’ just like 7.2 millions have already..they have left usa for good.in the past ten years. where can the aussie battler go to? i mean getting out of oz is a big step even for me. and i was born in east freo!! the only answer is to bulldoze canberra, shoot every politician available,if you see a good one shoot him or her before they go bad, revise or rather shorten our tax system or halve taxes across the board. and increase interest rates to 8%. get rid of the easy money which is killing economies the world over. in other words reward the savers and let people have more money to spend through reduced taxation. company and corporate taxes be reduced to stop the flow of goods and services industries leaving us. the legal rorts going on are so ludicrous. the lunatics are running the great aussie assylum. we can do better, i think. and make borrowing for business an active business which produces things and make housing more affordable in oz. sorry mate.. i can’t make a case for neg. gearing whilst house prices are so high. and two people working to maintain one household. for goodness sake a roof over ones head in oz is not supposed to be a death sentence! cheers, ron
Stuart says
Clearly Ron doesn’t have a ‘Shift’ key on his computer …
Jon Giaan says
he replaced it with a ‘consciousness shift’ key.
UPPERcase says
hOW InAnE sTuArT!!! fAiR dInKuM!!!
Do YoU HaVe NoThInG bEtTeR tO cOnTrIbUtE???
hE’s PrObAbLy UsInG a MoBiLe DeViCe.
GeT rEaL.
G says
Lay of the Golden Goose, I agree Jon. Those who work hard, risk their hard earned cash to get ahead get screwed.
Ron, yep leaving the “lucky country” maybe hard however I believe if all else fails vote with your feet. I’m currently looking at it.
Graeme I hear you and my sediments as well.
Maybe we need a Donald Trump here as well to shake the tree and keep the bastards honest.
Dave says
G.. Everyone who has a job works hard. For some reason..people seem to think if you are earning 100k you work harder than the retail manager earning 45k…just sayin. Also, “Risk their hard earned cash” ? But John touts how wonderful property is over all other asset classes. How is investing in property risky if you do the right thing by buying the right property and positively gear it?
brett duck says
This is how it works >> The person who goes to the Pub and drinks through his spare cash and puts the rest in a gaming machine ends up at retirement with very little. But then the system looks after this person with a pension.or social security unemployment benefits.
The person who saves their money and tries to invest gets crushed through taxation and gets the privilege of not getting social security when they lose their job because they have savings and are expected to spend their savings first. then when they retire they get the privilege to not get a full pension or a part pension because they saved or invested their money. .
Dave you better get down to the pub and chug that VB
Have you had a tenant trash a property and not pay the rent – Tenant Risk
The other risk is selling time can be long it takes if you need to sell in a slow market.
Property is a long term investment – Government Risk – Government changing policies Risk.
I am hoping the Government does stuff it up like in 1992 and causes the property market to once again crash so there will be buying opportunities .
steve says
Or a Pauline Hanson.
Vrezh says
It seems every time there is a problem (political, security, economic or otherwise) that arises in the community, the government uses that opportunity to exploit it to the fullest. They will use the issue or problem to leverage additional controls, laws and taxes against it, to the masses. This is not endemic to Australia but a (Western) word wide phenomenon. Its all about controlling the masses as much as can legally be possible under the guise of whatever the original issue was that triggered it. You have to ask yourself what is the real agenda here? Is it simply generating more revenue, gathering more information on its citizens, or intruding further into our personal lives by gaining further control. I do not trust them one bit!
Jon Giaan says
I think so too. Seems every chance they get the prune the tree of liberty…
Tom says
Various folk compare Oz with USA. Hang on a bit.
Unlike the USA, our Parliaments, as far as I am aware, do not sneak controversial, liberty-stealing legislation through by hiding it in some obscure piece of legislation, which the Members assume is all straight forward twaddle, and so do not read it carefully. Thank goodness for the Senate, the States’ house of review.
Regarding Trump – Can you imagine a ‘President Trump’ allowing another ‘Trump type character’ to challenge him? There would probably be another ‘Night of the long knives’.
Let us hope that the American people and their institutions are able to control him – but I’m not holding my breath.